Three Scenarios

Over the past decade, an increasing number of Indian pundits have championed the idea that the 21st century will be the “Indian century.” This is largely based on economic projections suggesting that, in the second half of this century, India will surpass both the United States and China and become the world’s largest economy. At the moment, India is considered an emerging power by strategic observers due to its large population and rapid economic and military growth over the past two decades.

What could the future hold for the world’s largest democracy? In his book India 2020: A Vision for the New Millennium former Indian president Abdul Kalam stipulated a lengthy list of how India should, and could, be by 2020. He infers that at this time India will be at an optimal point of both prosperity and strength. This makes studying India’s future vital to policymakers both inside and outside the country.

In his book, The World Economy: A Millennial Perspective, Angus Maddison states that history plays an important role in power politics and that great powers see themselves through a historical lens. Like China, India has historically seen itself as a superpower and a rich country. In the 1700s, India’s share of world economic output was 27%. In comparison, at this time Europe’s share was 23%. In 1950, that share shrunk to 3% and today India’s share of the global economy is around 6.5%.

Believers in a richer and stronger India advocate that its economic strength is bound to continue rising swiftly and will, in a generation, become the largest economy in the world. India’s advancement in the technological sphere, and increased entrepreneurship led by its young population, may resolve many prevailing social and political problems.

However, skeptics argue that India is on a course to self-destruct because it is unable to curb basic issues related to poverty and governance. They see a problem with a nation where more people have access to cellphones than adequate sanitation facilities. Such problems inevitably hurt governance and political stability – two manifestations that are perceived as the greatest threats to India’s influence on the global stage.

3 Scenarios for India 2020

To understand the state of India in 2020 it is necessary to showcase India’s internal and external forces which will decide the country’s next few years. This is done here by stipulating the key drivers and arguments, a few of which have been mentioned. The future is uncertain. Hence, this article will outline three scenarios which India may witness in 2020. The conditions and the developments from the scenarios will help understand the risks and the potential that may prevail leading to India 2020. The plausible futures are not a prediction, but rather, a reasonable explanation on how decisions and events pertaining to aspects of economy, politics, demographics, civil society and foreign policy may pan out.

In short, the alternate futures deduced are that India 2020 will between progress, fragmentations and stagnation. The purpose of delineating these alternate futures is to reduce risks and eliminate surprises for policy stakeholders. Following are the summaries of the three alternate scenarios. The summaries lay the foundation for a lengthier chronological discussion specifying the “timeline” and the “drivers” of the three scenarios later in this article.

#1- Strong and prosperous: India will be a robust economy which will maintain 7 – 9% growth for 7 years due to economic reforms. The poverty level will be cut by over 50% and India will be food secure. Demographic indicators will be improving, as aspired by policymakers. All human, social service, and demographic indicators will improve significantly. Indian debt will be reduced. There will be a dynamic civil society supporting government efforts to accelerate development and to deal with increased urbanization. R&D investment is at an all time high, which produces a boom in the technology sector. External relations with regional powers such as China, Pakistan, ASEAN and Middle Eastern countries will be harmonized to maintain a better trade and security policy. The issue of Kashmir will be resolved along with the threats of terrorism. India will become a regional powerhouse in South Asia with support from Pakistan, Sri Lanka and Bangladesh, by making SAFTA successful and building other regional institutions. Unlike historical offsets, all neighboring countries other than China – Pakistan, Nepal, Sri Lanka, Bangladesh, Maldives and Myanmar – have become stable democracies. Nepal and Bhutan are India’s strong allies which are acting as loyal Indo-China buffer states. Indian security apparatus is able to deal with any internal and external physical threat.

#2- Growth, not developed, with fragmented governance: India will maintain optimal growth of 7% but the development indicators will not change significantly. Poverty will only be reduced by 25%. Economic reforms have produced mixed results. India is urbanizing and the ever young country is demanding better governance. The central government in Delhi has not been able to produce robust changes that it envisioned due to corruption and competition among states. The role of provincial governments has increased and the central government’s role is minimized. As a result, national policies have not worked. The issue of Kashmir has remained unchanged, both India and Pakistan have proven indifferent to the cause while focusing on other priorities. Indo-China relations have gotten better because of increased trade; however, competition for Asian influence has hampered both nations from capitalizing on the full potential of friendly relations. In South Asia, India has become a stronger powerhouse, both in economic and military resources, but the region is still far away from being cooperative. Regional countries interpret India’s regional policy as being intrusive. Due to Chinese assistance in shaping their Maoist ideology, Nepal is not the strong and ultra-loyal buffer state between India and China as Indian policymakers expect. Moreover, the issue of Tibet remains a point of dispute between India and China. Regional institutions remain ineffective; and even though regional trade has increased from 4% to 12%, but it still is significantly low compared to Europe (65%) or Southeast Asia (40%) (ASEAN).

#3- Stagnated and threat-mitigating: India is not able to deal with its demographic changes. Young people, comprising over half of the population, are vastly unemployed. The sex ratio has reduced to an alarming low level of 900 women to 1000 men, creating major social problems. A large part of India is still rural where social services are inadequate. The youth bulge in the population is creating social unrest with increasing protests demanding better governance. Competition within states has left the central government completely ineffective. Hence, governance has become competitive and fragmented. Economic growth has reduced to 5% which does not satisfy the population boom. The threat of terrorism has significantly increased. Separatist and insurgent movements have proliferated in myriad remote areas. India has fought and won another war with Pakistan (which was subtly backed by China) over Kashmir. But many resources have been utilized in the war. Conventional and nuclear arms races have restarted with Pakistan. Poverty in India has only reduced by 10%. Indo-China trade has stagnated. China has a stronger hold in Asia which reflects India’s loss. China influences Nepal’s internal affairs, via Maoist politics, more than India can afford. The Tibet issue may rise from a point of dispute to actual conflict. This increases India’s perception of external threats from China. India faces a major energy crisis. Entrepreneurship and foreign investments are at an all-time low. The prospect of a peaceful and prosperous South Asian region has crumbled. SAFTA has not opened up any new markets. Regional institutions continue to be “talking shops”.

Timeline of Scenario #1 – Strong and Prosperous

2014-2017: TheIndian economy bounces back to 7% growth due to reforms to attract foreign investment. India’s large English-speaking youth segment is able to capitalize on foreign investments, which may give India a competitive edge over neighboring competitor China. Moreover, due to economic reforms which provide better protection and easier facilities to create wealth, local investments are also set to surge. The investments are in vital sectors such as technology, healthcare and entrepreneurship. India has started creating both manufacturing jobs and high-skilled jobs, which in turn are helping both urban and rural populations, especially the youth. Liberal policies for investments and economic activities in previously forgotten regions such as northeast and central India are being discussed. A progressive taxation system has been set up with proper tax reforms to collect the fair share of revenue from the increasing number of the new-rich.

The economic boom is creating new revenue for the government. The government addresses institutional reforms and takes anti-corruption measures. E-governance measures are set to be in place to increase efficiency. The policymakers make debt reduction a priority for India. Through a series of forums and media promotion, the government and the private sector are having close communication with civil society to address social issues related to economic development in India. Because the private sector has taken the lead in R&D spending, public spending is shifting into social programs.

Indian foreign policymakers have realized the need for India to hold a strong position in the external environment, both regionally and globally. India needs to keep up with globalization, be innovative in its diplomatic strategies and also modernize its security apparatus. This means India is bringing in new policymakers who will replace the competitive security paradigm with a cooperative security paradigm to reduce threats from other states and non-state actors. With a promising economy, India’s role in international affairs is rising. SAFTA has kicked in and Indian investors are able to invest in the region. Increasing amounts of Indian goods and services are selling in neighboring states. Due to high level diplomatic efforts, economic and cultural exchanges with Pakistan are improving. The Indian military has set up special R&D systems with increases in drone technology and investment in advanced devices, such as aircraft carriers.

2017- 2020: The Indian economy is booming at 9% due to the results of early economic reforms. Policymakers are discussing another set of reforms. High-tech and educated workers are helping businesses flourish in an enlarged consumer market. Tax reforms have significantly expanded the revenue base. As a result India is able to spend the revenue wisely. With anti-corruption policies (such as inflation adjusted wage for public employees), institutions are functioning more efficiently. The Indian government is able to refocus on its anti-poverty programs. Poverty has been cut down by 50% because of increasing cooperation between the private sector, the government and civil society. Human development has been made the priority for Indian public policy. As a result demographic indicators sectors like public health have shown significant improvement.

With an increasingly cooperative foreign policy stance, India’s relations with regional powers like China, Pakistan, ASEAN and the Middle East have improved, partly due to trade. Trade with China has increased three fold. Oil imports from the Middle East are helping India meet its energy demands. BRICS countries have turned out to be a power group in international society. India is a catalyzing force within BRICS. International nuclear deals have helped India diversify its energy sector. With confidence building measures like cultural and economic exchanges, such as trade in textiles, India and Pakistan are able to sit and honestly discuss the issue of Kashmir. Both nations have put aside confrontational policies and are able to divide and accept Kashmir as two zones with a common border. They have also discussed giving Kashmir some level of autonomy. As a result cross-border terrorism has significantly reduced in India. Terrorism and other internal security threats have diminished because of a recently modernized security and intelligence apparatus.

SAFTA is slowly reaping the benefits that it promised and India is able to benefit the most out of it. Indian goods, services and investments are flooding the region. Regional cooperation is promising regional security. Many conflict issues – particularly those relating to the border, migration, nuclear race with Pakistan, and maintaining Nepal as a buffer state – are being resolved because countries are able to tie their economies. Moreover, all countries at India’s border, except China, are now functioning democracies. The decade-old democratic wave in Pakistan, Sri Lanka (post-civil war), Maldives, Bangladesh and Myanmar has stabilized the region. Democratic values in the neighborhood are helping India better foster a compatible and cooperative regional policy. India is able to take leadership in regional institution such as SAARC. In short, India is an indisputable regional powerhouse.

2014- 2017:Economic reforms have been put into place. However, observers are not expecting quick results. Growth is at an optimal rate of 6% and is expected to rise to 7% if economic reforms attract investment and entrepreneurship. The government has declared that social programs will be made a priority and has invited the private sector to help out. Civil society has started getting money from rich corporations as part of the economic reform. However, the government does not have the capacity to oversee the transfer of the funds. As a result social development is not taking place as wished by policymakers. The poverty level is still at a high rate.

The government is not able to reform its tax code. As a result, the taxation system is flawed and the revenue base has yet to expand. The government is not able to finance projects, such as food security, that it prioritized. Urbanization is increasing and is projected to surge. Governance in India is not changing. Some restrained anti-corruption measures have been put into place because of increasing public pressure.

Indo-China trade has increased; however there is growing tension between the countries because of attempts to increase their relative power. There have been few cross-border disputes with China. Indian policy makers have vowed to increase military spending to rival China’s strategic rise. In South Asia, India is developing a cooperative regional policy. SAFTA has kicked in and the Indian economy is seeing some benefits of it, in which more Indian goods and services are flowing into neighboring countries. Strategically and militarily, India is able to deal with regional threats of cross-border terrorism, migration from Bangladesh and minor conflicts with Pakistan.

2017 – 2020: India’s economic growth has remained at 7%, which is still optimal. However, economic reforms have produced mixed results because they have not produced enough high-skilled jobs. Moreover, corruption is still an issue which has significantly hurt economic activities because of the prevalent inefficiencies. The Indian government has decided to spend a lot on infrastructure and R&D but that has taken money away from social programs. The government has also spent on the energy sector but it is not enough. Hence, India is yet to become energy sufficient. As a result human development indicators have not changed like the policymakers had envisioned. Poverty has only dropped by 25%. The private sector and civil society have developed a love-hate relationship and the government is not able to mitigate it. This hurts the development of the country.

The central government in Delhi is handling many obstacles to adjust the economy. But because of earlier failed economic reforms the government has been weakened by special interests. As a result the states have taken up the burden of economic development in their own provinces. The chief ministers of various states are providing incentives to attract economic activities. As a result there has been a rise in competition between states. In time, state-to-state competition has hurt the central government and its influence over the country’s political economy. India as a whole is not able to reach its full potential because of such disharmonious competition.

In the foreign policy sphere, India and Pakistan are still in relative conflict. Although India is a larger power than Pakistan, there is no political will to resolve the issue of Kashmir. Instead the border disputes have continued over the years. In addition, there have been major terrorist activities in India for which India blames Pakistan. The dispute-focused status quo is counter-productive for India. Indo-China trade has kept increasing over the years but both nations aggravate each other in international institutions and seek to become the lone Asian superpower. They have developed a “frenemy like” relationship. In the past few years there have been tensions over the Tibet issue, from which both India and China have tried to gain political points in international arenas. Although China is a greater power than India, with an economy about double the size, Indian military spending is at all time high in order to match the Chinese threat.

With SAFTA functional, and other competitive strategic regional policies, neighboring countries are finding India to be intrusive. They are seeking Chinese help in areas such as military aid and infrastructure spending. In Nepal, China is playing a stronger hand via the Maoist movement. However, Nepal still remains an Indian ally and remains a reliable buffer between India and China. Due to India’s unilateral regional policies, regional cooperation has been hurt. SAARC remains a dysfunctional institution. SAFTA’s benefits have not been equally distributed among all the partners. As a result regional trade has only increased to 8% when it could have increased to 15%. However, from India’s point of view, India still remains the most powerful nation in the region and is trying to better the friendly relations with neighboring countries.

Timeline of Scenario #3 – Stagnated and threat-mitigating

2014 – 2017: India has put forward various reforms, both economic and social, in order to advance development and growth. By the end of 2017 the results are yet to come. Economic growth has remained between 5 – 6%. Policymakers are still hopefully that these reforms will show results in the future. Therefore, they have refrained from making any bold reforms. Unemployment is not falling because of a lack of economic opportunities. Corruption remains a major problem. Development indicators have not changed over the years. As a result, civil society is taking an increasing role in social development. In response, the government has taken some inconsequential anti-poverty measures. By the end of 2017, the sex ratio in India has fallen below 900 females to 1000 males, with various regions reaching below 800 to 1000. This is resulting in frustration and high crime rates of rape and violence by young males. States have crafted myriad strategies to develop and grow at the provincial level. Consequently, states and regions (northeast and central India) with limited capacity and resources are lagging behind, indicating unequal development. Due to unequal regional development and lack of economic opportunities, insurgency movements have emerged in the respective regions.

Border tensions with both China and Pakistan have risen. India-China trade is still significant; however, it is not growing as projected. China has rebounded from its economic problems and is set to develop a stronger foreign policy doctrine. Chinese support for Maoist politics in Nepal is increasing. SAFTA has kicked in but it has not had any impact in any member countries, including India.

2017 – 2020: The Indian economy has stagnated at 5% and is not able to keep up with its population growth. This is putting India in a dangerous position both internally and externally. Policymakers are aware of the problem and have proposed various economic reforms. However, defense spending is still high due external threats. Demographic indicators have not improved. As a result economic performance has fallen with little foreign investment or domestic entrepreneurship. Therefore, social spending has reduced due to the shrinking revenue base. India has not been able to push through comprehensive tax reform. As a result inequality is at a record high. Due to efforts of the NGOs, poverty has reduced by only 10%. However, the government and the private sector are yet to drive social development as had been promised. Corruption is still rampant throughout the country. India’s debt to foreign countries and international institutions, like the World Bank, has risen because India had to borrow money as a result of the economic slowdown.

Over the years, national policies have failed to produce results which led to competition among India’s states, thereby further weakening the government in Delhi. The poor regions have been left behind and insurgency movements have increased significantly in these regions. The crackdown by Indian security forces is further depleting national resources due to the undertaking of continuous military operations. The crackdown has created divisive public opinion within the country and hurt national unity.

In international affairs, India-China trade has reduced in recent years, eventually stagnating. China has gained much influence in Asia and has projected itself as an Asian superpower. India has not been able to live up to its vision. Chinese assistance in military and infrastructure is significantly more than that of India in many important countries, including Bangladesh, Myanmar, Sri Lanka, Afghanistan and, as expected, Pakistan. India is extremely worried about China’s role in its neighborhood. With China’s rise and India’s relative loss, the issue of Tibet has become a point of contention, at times encouraging heated rhetoric from China in the international media.

Simultaneously, border incidents with Pakistan have increased in 2018. Due to an event at the border, another India-Pakistan war breaks out in Kashmir and China assists Pakistan in the war. After a six-month war, India is still able to win. In the process, India has exhausted much of its resources by buying military weapons and technology from countries like Russia. Policymakers are adopting a shift to refocus on building its economy and military. Due to the recent war, many of the South Asian countries have started viewing India as an aggressive nation.

In Conclusion: Events, dear boy, events.

Will India’s future look like any of the timelines outlined above? Any shrewd analyst will indicate that it will be some snips from all the above. It is surely numerous — that is, more than three versions — scenarios can be framed in discussing the political economy of a country as vast and as diverse as India. However, it is important for policy stakeholders to seriously consider the risks associated with long-term policymaking, both on national and international stages. Understanding the risks and possibilities of manifested events, gives policymakers sharper tools for negotiations. In the end, it is vital to remember how one famous British politician responded when asked what he feared the most: “Events, dear boy, events.”